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Apple's Supply Chain Secret

businessweek.com

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Re: Apple's Supply Chain Secret

#121

Post by evanwillms »

Dylan16807 wrote: post #115
danssig wrote: post #59

Earlier quoted context omitted.

>the company requires their suppliers to open their books for the inventory they sell to Walmart. They do. And they'll start making demands about how you run your business (e.g. "stop buying this local, you need to buy it from China and here are a list of companies we recommend you use"). You will have lots of sales through Walmart but you have to be careful that they don't destroy your business on a whim. See Dill P…

See what? I can't find what you're referring to.

It's referring to the anecdote of Vlasic, a pickle manufacturer, and it's woes of being a supplier to Wal-Mart. Basically, Wal-Mart negotiated hard with Vlasic to provide gallon(!) jars of pickles at at much lower margins than the company was used to.

That nationwide Wal-Mart "every day low price" cannibalized sales of smaller pickle units at other stores and Vlasic saw it's profits on pickles fall 25%.

In unrelated news, Vlasic filed for bankruptcy a few years later.

The entire tale is told in much better narrative by a 2003 Fats Company article: http://www.fastcompany.com/node/47593/print

Re: Apple's Supply Chain Secret

#122

Post by Tangurena »

asmithmd1 wrote: post #81
MichaelApproved wrote: post #67

Earlier quoted context omitted.

Weigh that with times that they pay in advance. It's a case by case bases and I'm sure they're not late with payments. If they wait as long as 90 days, I bet it's because that was part of the business agreement they made with the manufacturer.

I would bet that 90 day payment was a one off. You notice NO ONE quoted in the article was willing to have their name used so it might have been a friend of a friend story. The suppliers who talked gave details about turning down a $1 Billion pre-payment!

I disagree for 2 reasons. First, Apple is notorious with NDAs. Second, many large retailers are quite willing to cancel contracts with any supplier that gets uppity enough to complain in public. Walmart is so notorious for cancelling suppliers that most Walmart suppliers will refuse to allow any company representative speak on the record.

Re: Apple's Supply Chain Secret

#123

Post by malyk »

pooriaazimi wrote: post #120
swombat wrote: post #52

Earlier quoted context omitted.

You can see them with the naked eye, if you look from about 5-10cm away. (and, presumably, if you have excellent vision or are near-sighted)

they're talking about the GREEN indicator, on top of the screen (which shows the iSight camera's status), not about sleep indicator (the WHITE, rectangular thing, beside the IR receiver). http://venturebeat.files.wordpress.com/2011/11/macbook-air-w...

The ones on my wireless keyboard are easily visible as individual holes when the light is on from 2 feet away. I don't know if the iSight is different (not having a metal macbook), but they are probably very close to the same.

Re: Apple's Supply Chain Secret

#124

Post by adamtmca »

binarray2000 wrote: post #65

OK...I cheer to so many things Apple does regarding operations. But when I read Apple [..] sometimes doesn't pay until as long as 90 days after it uses a part [...] I think only "lame". With $80B and 40% margin, company with that reputation... Manufacturing is hard. And very expensive. Organize processes, buy machines and raw materials, pay the labor. And then comes Apple and gives itself a loan (basically, it's a lo…

I never understand why people try to pass judgment on a transaction like this. Their suppliers are real businesses who are capable of modelling their cash flows and deciding whether or not this is profitable. No one ever stops and says, "wait.. it makes business sense to sell to Apple, but this is lame so let's not do it".

Re: Apple's Supply Chain Secret

#125

Post by adamtmca »

padobson wrote: post #62

I think Apple's supply chain management is a greater competitive advantage than their product design. There are many factors beyond the quality of product that go into a purchasing decision - things like hype, accessibility, and most importantly, price. Apple never had much a problem with great design or building hype, but the real reason for their success over the last 15 years has been their ability to provide cust…

Thinking about them separately is a mistake. Apple is able to execute many of their designs because they can lean on their suppliers & manufacturers. Similarly apple is able to deliver high margins, price iPads at 500 etc because they make design decisions with the supply chain in mind.

Re: Apple's Supply Chain Secret

#126

Post by dlss »

adamtmca wrote: post #124
binarray2000 wrote: post #65

OK...I cheer to so many things Apple does regarding operations. But when I read Apple [..] sometimes doesn't pay until as long as 90 days after it uses a part [...] I think only "lame". With $80B and 40% margin, company with that reputation... Manufacturing is hard. And very expensive. Organize processes, buy machines and raw materials, pay the labor. And then comes Apple and gives itself a loan (basically, it's a lo…

I never understand why people try to pass judgment on a transaction like this. Their suppliers are real businesses who are capable of modelling their cash flows and deciding whether or not this is profitable. No one ever stops and says, "wait.. it makes business sense to sell to Apple, but this is lame so let's not do it".

I think "no one" is a bit strong there. The article cites one company who walked away from a profitable $1B deal for a dressed up version of "but this is lame"

Re: Apple's Supply Chain Secret

#127

Post by mkramlich »

Speaking as a contractor, I have a bias/tendency to eventually "fire" any client that takes too long or is too sketchy about paying me. Too much risk on my part. I work, I get paid. With all bullshit set aside, it should only take on OOM of about 1 minute to write a check, put in envelope, put stamp on it, and put in outbound mailbox. Anything longer than that is self-imposed bureaucracy, not physics.

Re: Apple's Supply Chain Secret

#128

Post by Tangurena »

antoinehersen wrote: post #21
notatoad wrote: post #8

Earlier quoted context omitted.

ruthless. they handle so much more volume than any other retailer that suppliers are willing to sign anything just to be a part of it. all losses are passed back to the suppliers, which enables wal-mart to take huge risks. the sibling comment to mine references a huge volume of pop-tarts being shipped to florida in preparation for a hurricane. if during mid-shipment the weather changed, wal-mart would call up the sup…

If they make more money this way why are they getting screwed?

One story that I think can help explain why many companies are stuck selling to Walmart is this one: http://www.fastcompany.com/node/47593/print

The issue quickly becomes a "damned if you do, damned if you don't" issue. If you supply them, they quickly drive your margins to the point where you have to offshore to stay in business. If you don't supply them, you get cut out of the largest retailer in the US and lose that way. Either way, you are screwed.

As I mentioned earlier, if you replace your ERP system (or upgrade it past a certain dollar point), you have to modify it so that Walmart has direct access to the internals. This means that they're placing (and cancelling) orders directly in your system without intervention (if you aren't careful, this can foul up your staffing). This also means that they know your costs, expenses and margins. You aren't going to have any negotiating power when it comes time for them to lower your prices.

Re: Apple's Supply Chain Secret

#129

Post by barredo »

AlexMuir wrote: post #79
binarray2000 wrote: post #65

OK...I cheer to so many things Apple does regarding operations. But when I read Apple [..] sometimes doesn't pay until as long as 90 days after it uses a part [...] I think only "lame". With $80B and 40% margin, company with that reputation... Manufacturing is hard. And very expensive. Organize processes, buy machines and raw materials, pay the labor. And then comes Apple and gives itself a loan (basically, it's a lo…

At this size, I don't really feel like it's an issue. Manufacturers for Apple will all employ financial analysts whose job is to price the 90-day payment terms into their prices. If you're going to pay me tomorrow, I'll quote you $1 a widget. If you're paying in 90-days it's $1.04 a widget. Incidentally, I know a wholesaler [1] in London which sells at almost cost price. It makes most of its profits from sitting on t…

Big German retailer mediamarkt/Saturn does this. So does French Carrefour. 90/120 days I think

Re: Apple's Supply Chain Secret

#130

Post by comedian »

AllenKids wrote: post #107
binarray2000 wrote: post #104

Earlier quoted context omitted.

Why it's silly? Apple has 90 days of non paid supplies on the books (and $80 billion in the bank - "cash and investments" as stated in the article). If they'd (OK... IDEALLY) pay all of them at once and continue paying supplies as they get delivered, only then would their balance sheet look realistic. Or, am I missing something?

Because under GAAP accounts payable (the money Apple owes its suppliers) is debt. Plain and simple.

Yeah this is very common and it's one of the reasons why Apple is so good at managing their cash.

By delaying payments Apple can use the cash for other short-term investment opportunities. In Apple's case, their accounts payable is probably in the billions. As an example: If Apple has a $10 billion accounts payable and instead of paying it right away they waited for 3 months and invested that $10 billion on short-term securities with a 10% return, Apple would earn $1 billion in that 3-month period vs. ZERO if they paid their liabilities right away.

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